JPM’s Sheikh says search for income is a ‘global challenge’
On the three- year anniversary of the JPM Multi-Asset Income Fund, Talib Sheikh, one of the fund's managers, talks about how the flexibility and diversity of the fund has allowed the team to seek out the very best income generating opportunities and how the search for that income is now a ‘global rather than a domestic challenge.'
Although the fund's primary aim has been to produce a high level of income, currently yielding over 5%, this has not been at the expense of capital appreciation with the fund having returned over 35% since launch in July 2009.
Sheikh explains: "With a prolonged low interest rate environment in the UK and around the world, income has become extremely precious. Having the flexibility to invest anywhere and allocate assets tactically has never been more essential.
"Key to the performance of the fund is the breadth of the opportunity set. Asset allocation has always been the key driver for portfolio returns. We are seeing compelling opportunities in the high yield market; where the risk taken is rewarded with a highly attractive yield. Alongside high dividend yielding developed market equities, the emerging markets are becoming more disciplined in their corporate governance and we're beginning to see more opportunities for income there. We believe in defensive companies that produce an attractive yield through strong and predictable cash flows associated with industries such as utilities and infrastructure. Our ability to look at these asset classes alongside others such as REITs, convertible bonds and emerging market debt, provides an asset allocation range that allowed the fund to significantly outperform its IMA (Investment Management Association) peers."
On the importance of diversification, Sheikh said: "Accessing income is not only a global challenge but one that needs to pay heed to the age old lessons of diversification. We're conscious of the impact that adverse news flow can have on an individual stock and its dividends, and the greater effect that, in turn, can have on an entire portfolio. Indeed, over the past few years some of the biggest UK equity income staples have hit the headlines for the wrong reasons. The JPM Multi-Asset Income Fund currently holds a diversified mix of over 700 securities so should any individual position face a problem, the exposure to that security and hence the impact on the portfolio as a whole, should be minimal. As a result, investor capital will remain more stable and income more steady."